Pretty sure that’s how it’s always supposed to be done..? Every single bond/derivative NPV calculator is discounting based on some observable curve (e.g., OIS-discounting for a USD vanilla interest rate swap) that inherently discounts CFs variably based on the shape of the curve.
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@valueterminal do you know?Thanks. Twitter will use this to make your timeline better. UndoUndo
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I heard about some machine learning systems for video game microtransactions. They try to figure out what price an individual will pay for an item, and the optimal time/method to show it to them. Sounds really exploitative and not something that should exist in games.
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Ya, it’s called Hyperbolic Discounting. Useful explanation for why people don’t do what’s supposedly in their best interests, long-term. https://en.wikipedia.org/wiki/Hyperbolic_discounting …
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“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Technological change unfolds exponentially, like compound interest, and we humans seem wired to think about exponential phenomena in flawed ways. (Breaking Smart)
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Sure. Discount rates are themselves a theoretical simplification of valuing cash-in-hard different at different times. When you have a better model of your own situation than the default tools would, use the better model.
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